At Heritage, we believe that education is an important part of the estate planning process. On this blog we will be sharing some information, articles, and opinions that you may find helpful along your way.

POA

07/30/2014

Many older people moving into a nursing home or retirement community are experiencing cognitive decline. In legal terms, they no longer have the capacity to make financial or medical decisions for themselves. So a trusted person—usually an adult child—will sign the entrance contract on their behalf as power of attorney.

There tends to be a lot of confusion over entering into an agreement for long-term care for a loved one who is cognitively impaired. If you are signing your name under "Responsible Party," do you know what you are signing up for?

A recent MarketWatch article, titled "How a parent’s health-care bills could hurt you," says you should be aware of the issues when signing your name in lieu of your parent’s on a contract without adding any clarifying language. In most cases, you are acting as a guarantor who is personally responsible for the payments.

This can come up when dealing with a family member's hospital and doctor bills which are not covered by insurance. Typically, the patient or patient’s representative signs a form stating that they will be responsible for such expenses before the treatment begins.

Without noting your signature, you could be responsible for some hefty bills—monthly fees at a retirement facility or nursing home can be $10,000 or more.

That might not be what you signed up for!

Estate planning and elder law attorneys will counsel you to set up a “durable” power of attorney. A durable power of attorney lets a trusted individual (in legal terms "the agent") retain power of attorney even when the family member who signed the document (the “principal”) is now incapacitated.

For example, as the named agent for your family member on a financial power of attorney document, you have access to his or her banking to pay the retirement or nursing home on their behalf. Again, you need to remember one thing when signing a contract and agreement; otherwise, you will be personally guaranteeing the payments.

The MarketWatch article recommends you separate your responsibility as power of attorney from the financial responsibility of your family member by signing their name as the responsible party on the contract, and after that write, “by [your name] as power of attorney,” followed by the date.

So it would look something like this:

by Alvin Hancock as power of attorney, July 22, 2014

Do not get into trouble and put the care of your family member in jeopardy. Talk to an estate planning attorney to set up a durable power of attorney to help you take care of your family member and protect your money.

07/25/2014

A power of attorney is a legal document that allows you to appoint someone you know and trust to make decisions on your behalf when you cannot make them yourself. A recent article in The Star-Ledger, titled "Your Money: The truth about 'power of attorney' documents," provides helpful information about the essential subject of powers of attorney and their uses.

A "Special Power of Attorney" grants an individual the authority to perform a specific act or acts. Just like the name implies, this authority is limited to the special powers listed.

A "Durable Power of Attorney" expressly provides that it is not terminated by the grantor's incapacity. In contrast, a "Non-Durable Powers of Attorney" is terminated if the principal becomes incapacitated. The document can be as broad or as specific as the grantor wants, but generally it gives a person expansive powers and is used when the grantor becomes incapable of managing his or her affairs.

Similarly, a "Springing Power of Attorney" can also be very particular or expansive, but it only "springs" into effect if the principal becomes incapacitated. Caution: this type of document can create issues, as financial institutions will not recognize this POA until they receive official notification of the incapacity of the grantor.

Last, some states have a "Statutory Power of Attorney" in which case the POA need only be presented to the financial institution. The institution must honor a validly executed POA unless it believes in good faith that it does not look genuine, that the principal is deceased, that the document has been revoked, or that the principal was under a disability when he or she signed it.

Some financial institutions may not be helpful. In fact, some will insist that their particular form needs to be completed. Also, if incapacity has already occurred and an institution is unwilling to honor the POA, The Star-Ledger suggests that you bring in your estate planning attorney to help resolve the issue. Finally, the article reminds us that a POA commonly only covers financial matters, and that a separate health care POA is needed for health issues.